Withdrawal from settlement discussions is a dicey option

The General Court (Case T-546/10 - Timab) recently backed the Commission’s approach regarding the consequences of a withdrawal from the settlement procedure during a cartel investigation. The origin of the ruling was that one of the participants of the animal feed phosphates cartel withdrew at a rather late stage from the settlement discussions, in which the Commission already presented its preliminary views, including the range of potential fines.

The General Court confirmed the fine of nearly 60 million euro imposed on Timab in the context of the cartel. This is the first “hybrid cartel case”, where for the first time the General Court ruled on the relationship between the standard procedure and the settlement procedure. In fact only Timab refused to enter into a settlement with the Commission, while all the other participants in the cartel decided to settle the probe.

The final outcome of the withdrawal and the return to the standard procedure was somewhat paradoxical. Even though Timab’s response to the ordinary statement of objections led to a reduction of its participation in the infringement by nearly 15 years, the final amount of the fine was almost 15 million euro higher than the initial maximum fine that the Commission proposed during the settlement discussions. After returning to the standard procedure, the Commission granted a substantially lower reduction for cooperation than initially foreseen in the settlement discussions. Therefore, the fact that the basic amount of the fine was lower due to the reduction of the duration resulted in an overall higher fine under the established methodology.

The Court affirmed that, even though the principle of equal treatment applies, the Commission is not bound by the range expressed during the settlement procedure, here approximately 45 million euro, since additional arguments or evidence can be brought as part of the standard procedure.

The reasoning of the applicant that the Commission applied a fine higher than the amount proposed at the stage of the settlement investigations mainly because of its withdrawal from the settlement talks has been rejected by the Court, referring to the distinct nature and characteristics of the two procedures. This also confirms the basic principle of the settlement procedure that both parties can discontinue the discussion and return to the standard procedure, without a binding effect for the involved parties.

In addition, for the General Court the fine increase was also a consequence of the additional information acquired by the Commission during the standard procedure. Still, the General Court highlights the fact that the gravity of the infringement and the absence of aggravating or mitigating factors was considered in an equal manner for all participants of the procedure, which might serve as a hint that the Court sees a certain link between the settlements and the findings in a normal decision in hybrid cases.

The ruling will most likely influence the range of manoeuvre for both sides in settlement discussions and highlights the need to develop a clear strategy from the start.